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Wireless and IT market in U.S. 3rd December, 2003
송 석헌Principal Analyst
Copyright © 2003
Agenda
Wireless Market
IT market overview
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Time to Panic?
0
50,000
100,000
150,000
200,000
250,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
0
10
20
30
40
50
60
70
80%MobileSubscribers
Penetration
Subscribers in Thousands
50%
Adoption rate and revenue are slowing, profits are decreasing, there is a slow uptake of data services: price war, consolidation and panic.
• Prices continue to decline through 2003.
• Hard push in selling data services.
• ARPU is flat, churn high.
Copyright © 2003
Preview into US Wireless MarketPreview into US Wireless Market
High Competition—Urban markets have as many as 7 competitors, rural areas will differ.
Prepaid % is Low -Prepaid % of total subscribers is less than 10%, but this is changing.
Cost to end user port will be less than $25 in steady state— Cost to carrier to do porting after initial system investment will be less than $10 per port. The cost to end user could come down to zero in a competitive market.Time to Port Expected to be Quick — Time to port a number is expected to be 2.5 hours, Carriers will tell customers 6 to 24 hours.
Wireline to Wireless Substitution — Initially expected to a minimal, long term factor depends on QoS, Price, 911 Issue, data services. Estimate 1 to 10% of ILEC base away from them, in first year. Ubiquitous Wireline Rate Centers and 6 or more competitors. 50%or greater would be eligible to be ported. Porting takes a couple of days, Wireless Carrier interest.
Business vs.. Consumer—Gartner End User SurveyConsumers 35%say they would switch if they could keep their own phone number.Business 43% say they would switch if they could keep their own phone number.
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2001 2002
North American Cellular/PCS Network Evolution
2004+
TDMA TDMA (circuit)(circuit)
9.6k9.6k
GSM GSM (circuit)(circuit)
9.6k9.6k
EDGE (packet)
384 Kbps
GSM GPRS (packet)
115 Kbps UMTS “WCDMA
” 2M
<20 Kbps 144 Kbps 384 Kbps 2000 Kbps
iDEN iDEN 14.4k14.4k
19961996Pre-1996
115 Kbps
AMPSAMPS14.5 14.5
KbpsKbps
2.5G 3G2G
CDMA IS-95
(circuit) 14.4
Kbps
CDPD (packet)
19.2 Kbps
CDMA 1xEVD
V 5.2 Mbps
CDMA 1xEVDO (packet)
600 Kbps to 2.4 Mbps
CDMA 1xRTT (packet) 155Kbps
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Korea
StrongModerateWeak
Technology Social Attitude Market
KoreaPhone Korea
Consumer
KoreaBusiness
U.S. Phone
W. EuropePhone
W. Europe
W. Europe
U.S. PagerU.S.
Consumer
U.S.
U.S. WLAN
ROW WLAN
Regional Status
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North American Mobile Service Revenues
$0
$20
$40
$60
$80
$100
$120
$140
$160
1999 2000 2001 2002 2003 2004 2005
DataVoice
In BillionsIn Billions
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U.S. Wireless Data Subscribers
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,0001
99
9
20
00
20
01
20
02
20
03
20
04
20
05
20
06
U.S. Wireless DataSubscribers
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Regional ARPU Comparisons
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
2000 2001 2002 2003 2004 2005 2006
U.S. Wireless DataARPU
Western EuropeanWireless Data ARPU
Asia Pacific WirelessData ARPU
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Application Are The Key to Driving Revenues
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
2000 2001 2002 2003 2004 2005
M-Commerce
BusinessApplications
Location Services
Financial Services
Information basedservices
Entertainmentservices
Messaging Services (Revenue Numbers In $Millions)
U.S. Wireless Data Revenues
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• Telemetry
• Machine to Machine Communications
• Broadband Service
Other Revenue Options
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Applications Ecosystem
End UserCarrierBillingDistributorPublisherDeveloper
Customer care
Tira Wireless,
Club Noika, Handago
Jamdat, Digital
Bridges, Summus
EA Sports, Blast
Mobile, 686 Studios,
Sony Pictures
Qpass, 4th Pass
Sprint, T-mobile,
AWS, VZ, Nextel,
Cingular
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TransactionsTransactionsUsageUsageSubscriptionsSubscriptions AdvertisingAdvertising
Revenue Revenue CategoriesCategories
Telco revenue
Adver-tising
Telco revenue
RevenueRevenueGeneratedGenerated Call feesCall fees
Kickback feesKickback fees
TransactioncommissionsTransactioncommissions
FrequentFrequent
One-time usage
One-time usage
Kickback feesKickback fees
MarketMarketOfferingsOfferings
Mobile Internet PackageMobile Internet Package Mobile Internet PackageMobile Internet Package
Carrier’s New Revenue Structure
Merchan-dising
Content, products &
services
Call center
ISPISP PortalPortal MobileMobileservicesservices
Fees per adFees per ad
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Consumers will represent 70 percent to 80 percent of wireless data users; however, enterprise users will represent 70 percent to 80 percent of wireless
data revenue.
Enterprise users must recognize this and use it as a lever when negotiating with service providers, application vendors and device original
equipment manufacturers.
Users Revenue
Enterprise Users
Will Enterprises Adopt Mobile Technology?
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WSP Data Strategy
CONSUMER ENTERPRISE
Nextel
VerizonWireless
T-MobileSprintPCS
Cingular Mobitex
CingularGPRS
AT&TWireless
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2003 Wireless Service Provider Magic Quadrant
Verizon
AT&TNextel
T MobileSprintPCS
Cingular
Western Wireless
Qwest Wireless
USCCAlltel
Vision
Execution
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Terminal Market share - North America
Mobile Terminal Market Shares, 2Q02 vs. 2Q03 (Thousands of Units)
Sales to End Users 2Q02
Market Share 2Q02
Sales to End Users
2Q03Market Share
2Q03 Change
2Q02-2Q03Motorola 6,586.4 28.4% 7,921.5 32.0% 20.3%Nokia 7,809.9 33.6% 7,512.1 30.3% -3.8%Samsung 1,678.8 7.2% 2,667.7 10.8% 58.9%LG 1,808.3 7.8% 2,424.3 9.8% 34.1%Kyocera 1,847.4 8.0% 1,089.2 4.4% -41.0%Audiovox 1,431.5 6.2% 892.4 3.6% -37.7%Sanyo 492.3 2.1% 732.6 3.0% 48.8%Sony Ericsson 982.7 4.2% 691.0 2.8% -29.7%Siemens 167.1 0.7% 671.5 2.7% 301.7%Others 406.4 1.8% 156.3 0.6% -61.5%Total 23,210.9 100.0% 24,758.7 100.0% 6.7%Source: Gartner Dataquest (September 2003)
• Motorola, Nokia and Samsung, respectively, continue to hold the top three market share positions• LG, thanks to a leading share position at Verizon Wireless, looks quite well-positioned to make a strong run at the No. 3 spot
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There will be winners and losers from WNP
Business and Consumer Markets will
act to different degrees
WNP is a small factor in Churn, after
implemented churn is expected to
increase from .1 to .3% in urban markets.
Less in Rural Markets
How is Wireless Number Portability Going to Impact?
Copyright © 2003
Key Factors for Churn Wireless Number Portability
Competition—The number of competitors in the market and how those competitors will compete and react in the market will be a factor in how the churn rises in a market due to WNP. Penetration of market increases stakes in zero sum game.
Cost to Port Number—The cost to end user for number porting will determine how attractive a number port is.
Time to Port Number— The time to port a number may provide some minor inconvenience but should not be a major factor, unless a new service or service plan is desired.
Postpaid/Prepaid Ratio—The higher the percentage of postpaid customers to prepaid customers should dampen the effects of WNP due to contracts, relationship with customers, and time to react to customers request.
General Customer Satisfaction—The characteristics which determine churn such as coverage, service quality, price, customer service will be the most important determinates of churn.
Copyright © 2003
Cost for Switching Service Providers
Source : Gartner Research (Dec. 2003)
According to our latest model, to switch 1,000 users from one service provider to the next can cost more than $300,000.
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Country
Hong Kong
Australia
UK
Italy
Portugal
Germany
Competition
High
Moderate
High
High
Moderate
High/Moderate
Time/Cost
1-2 Days/$26
3 hours/$8
9 Days/$55
5 Days/$8
27 Days/$12
NA/$25
Churn
Increase
Decrease
Flat
Increase
Increase
Decrease
Source: Gartner, Inc.
Churn Impact of WNP by Country
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IT Budget Growth Has Stalled
IT Budget Increase Over the Previous Year (%)
10.1
-7
15.015.9
9.7
1998 1999 2000 2001
2002
-.2
2003
• The average company spends about 4% of gross revenue on IT.
• The industries that spend the most of IT are financial services,IT and telecom-munications.
• The typical firm spends about $6,600per year per employee on IT.
• IT headcount comprises 5% to 7% ofthe total employee population inthe typical enterprise.
Copyright © 2003
The Current Climate of IT Market
Companies want to leverage their current IT investments, and only then, buy more.
IT baseline costs are significant, and rising. (Baseline makes up about 75 percent of operating budget.)
Money is tight, so IT prioritization is key.
Business managers are savvy about IT and want to have more control over IT decisions.
IS faces threat of outsourcing.
CFOs are watching/approving IT purchases.
Business value of IT is finally being measured.
Copyright © 2003
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2000 2001 2002 2003 2004 2005 2006 2007
Asia
J apanME&Africa
C&E Europe
WE
LANA
IT Service Services by Region, 2000-2007
Unit : Million USD
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0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000 2001 2002 2003 2004 2005 2006 2007
Software Maintenance andSopportHardware Maintenance andSupportProcess Management
IT Management
Development and Integration
Consulting
U.S. IT Service Market Size and Forecast by Segment
Unit : Million USD
